Yahoo Finance Is It The Right Time To Buy Birchcliff Energy Ltd (TSE:BIR)?
Birchcliff Energy Ltd (TSX:BIR), an energy company based in Canada, saw a significant share price rise of over 20% in the past couple of months on the TSX. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Birchcliff Energy’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Birchcliff Energy
What’s the opportunity in Birchcliff Energy?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 0.7x is currently trading slightly below its industry peers’ ratio of 1.21x, which means if you buy Birchcliff Energy today, you’d be paying a relatively fair price for it. And if you believe Birchcliff Energy should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Birchcliff Energy’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Birchcliff Energy?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With revenues expected to grow by a double-digit 16.29% over the next couple of years, the outlook is positive for Birchcliff Energy. If the level of expenses is able to be maintained, it looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in BIR’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at BIR? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on BIR, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for BIR, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Birchcliff Energy. You can find everything you need to know about Birchcliff Energy in the latest infographic research report. If you are no longer interested in Birchcliff Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.